Suppose that:

r = required reserve ratio = 0.20

c = {C/D} = currency ratio = 0.25

e = {ER/D} = excess reserve ratio = 0.05

MB = the monetary base = $5,000 billion

Given that the formula for the money multiplier is

1+c / r+e+c,

find the value for

M,

the money supply.

The money supply is

$12,500 billion. (Round your response to the nearest whole number.)

Part 2

Use the money multiplier to find the new value for the money supply if open market operations increase the monetary base

by

$200

billion.

The money supply is now

$?

billion. (Round your response to the nearest whole number.